By James A. Loyola
Except for the coming initial public offering of a supermarket chain, the Philippine Stock Exchange does not expect a lot of capital raising or stock listings this year due to the effects of the pandemic and the low interest rate environment.
In an online forum, PSE President Ramon Monzon noted that the bourse already had problems getting firms to list more shares even before the start of the pandemic with a share of only 20.2 percent of securities issued in 2019.
He noted that local companies prefer the issuance of fixed income securities to shares of stock due to the liberalization of interest rate via a series of rate cuts and increasing liquidity by reducing reserve requirements.
“This makes it cheaper for companies to raise capital from the debt market rather than the equity market,” said Monzon.
He added that, IPOs are also not very attractive to investors now because prices of listed stocks have fallen and price-to-earnings ratios are very low even for blue chip companies.
“It would be very difficult for a company to undertake an IPO now because it will be competing with some well-established companies that have been in the market for so many years so they will be more careful where the equity market is concerned,” Monzon said.
Thus, Monzon said “we are not too optimistic that there will be many IPOs this year.”
Regarding the planned initial public offering of Merrymart Consumer Corporation, Monzon said it will push through with listing its shares on June 15 although the PSE had raised some concerns and required the firm to remove “optimistic targets.”
“We also required them to make a very, very prominent disclosure on the fact that, a month before, the controlling shareholder subscribed to shares at five centavos and now it is being marketed at a target price of one peso,” stressed Monzon.
MerryMart, the grocery retail chain of tycoon Edgar “Injap” Sia II, is pushing through with its planned P1.59 billion initial public offering despite the global economic turmoil caused by the COVID-19 pandemic.
The firm said it will set its final offering price on May 22, 2020 with the offering period running from May 27 to June 5 and tentative listing date on June 15, 2020.
MerryMart is planning a primary offer of 1.59 billion of its common shares at an indicative price of up to P1.00 per share.
To assure potential investors, MerryMart said it is in the Covid-19 pandemic-resilient, non-discretionary, basic essential retail category making it a strong and in-demand profile even during these times as it sells primarily necessities like groceries and pharmaceutical products.
“MerryMart Group currently operates 7 branches. MerryMart has several branches that are ready to open as soon as few weeks after the enhanced community quarantine is lifted, and will keep its target to open the 100th MerryMart branch on or before December 2021 next year,” the firm said.
The firm added that, it is poised to secure more superior prime locations around the country, and attract more good talents to join its team after the ECQ is lifted.